State settles suit over insurance troubles

Friday, Jan. 4, 2002 | 9:01 a.m.

CARSON CITY -- The state has agreed on a $500,000 settlement in a 5-year-old lawsuit against a company that mismanaged the employees health insurance system, resulting in several million dollars in losses.

The directors of the Public Employees' Benefits Program on Thursday voted unanimously to accept the settlement with L & H Associates and its owners Frank and Susan Rousseau, who are bankrupt.

Solicitor General Tony Clark said the state has agreed to dismiss the suit and will not file additional suits in the case.

L & H was hired to process claims for payments from doctors, hospitals and other medical officials who treated state workers and their dependents. But the system broke down in 1996 and early 1997, and those who provided the treatment weren't paid for as long as eight or nine months.

L & H was fired by the state, which sued and sought millions of dollars in damages. Because of the late or non-payment and the multitude of errors, the state lost the discounts it received for paying bills within 30 days.

The 1999 Legislature pumped $26 million into the system to keep it solvent.

In the midst of the confusion, Mary Ferris, an employee of L & H Associates, was convicted of embezzling an estimated $600,000 from the system. She allegedly set up dummy corporations that billed the state for medical services that were never performed.

The FBI recovered $430,000 of the money that was not spent, and the state collected $52,000 from two bonds, for a total of $482,000. Ferris received a prison sentence.

Rousseau was indicted in Will County, Ill., on four counts of felony theft involving workers' compensation plans. However, Clark said Rousseau was not convicted on any of those allegations.

Bankruptcy proceedings against L & H Associates are under way in Fresno, Calif.